"Unless you experience the unpleasant symptoms of being wrong, your brain will never revise its models. Before your neurons can succeed, they must repeatedly fail. There are no shortcuts for this painstaking process."
Pg 54 - HOW WE DECIDE
"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.
The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."
Pg 64 - HOW WE DECIDE
"Think about the stock market, which is a classic example of a "random walk," since the past movement of any particular stock cannot be used to predict its future movement. The inherent randomness of the market was first proposed by the economist Eugene Fama, in the early 1960's. Fama looked at decades of stock market data in order to prove that no amount of knowledge or rational analysis could help you figure out what would happen next. All of the esoteric tools used by investors to make sense of the market were pure nonsense. Wall Street was like a slot machine."
Pg 67 - HOW WE DECIDE
TRADING IS SIMPLE:
* Price either goes up or down.
* No one knows what will happen next.
* Keep losses small and let winners run.
* POSITION SIZE = RISK / STOP LOSS
* The reason you entered has no bearing on the outcome of your trade.
* You can control the size of your loss (skill) but you can't control the size of your win (luck).
* You need to know when to pick up your chips and cash them in.
The following 6 users say Thank You to TheRumpledOne for this post:
I was so bored of watching the indexes.... I decided to check out other markets and saw gold looking a little toppy. The 8 range bar chart on gold was sort of an in between setting.... fast but not too fast, slow but not too slow. It told me what I needed to know. You'll notice that it made the high, came down, took another shot at the high, did not break it, then broke below the point it had previously come down to. This was the entry. As a target I picked 3 ticks above the resistance that it broke at 8:39 PST. Since I am not an experienced gold trader I only traded a one lot. If I had more confidence I might have traded a 2 lot, taken one off where I did and the other at the 50 EMA. That's "hindsight trading"
Look at gold on other chart settings and you'll see that other settings don't seem to show the movement as well. I just keep trying different settings until I find one that looks good to me.
I noticed in your previous post that page numbers preceeded some of the quotes. What book are these pages being quoted from?
Also, I remember you as not being a fan of "squiggly lines on your chart" Do you have a bare bones approach that would be useful to those of us who are trying to focus on price action and not indicators?
Welcome to the forums TRO, glad to see you again. Thanks for an interesting post. You've posted tons of indicators and ideas for edges over the years. I'm curious what kind of system you use primarily? Are you using indicators or just price action? This thread has been new to me and I'm really liking having less indicators.
Here's a chart with some explaination of the trendline break. As far as entry is concerned, you could always jump in at the market or place a buy/sell stop at the break of the swing high/low +-3 ticks.
As far as the anchor is concerned.... the way I use it is to simply multiple your trading chart setting 1.5 times. In the past I just put a 14 HMA on the anchor chart and pretty much tried to use that for direction. More recently I'm doing a experiment using the Sharky EcoBars on the anchor chart with nothing else..... scrunch it up and put it below the trading chart. So far, I'm likin' it. Always looking for ways to stay on the right side of the market because my approach is trend trading. Mainly looking for continuation trades. Although you'd hardly know it by my recent trades !!
Last edited by Jeff Castille; September 3rd, 2009 at 02:50 PM.
The following user says Thank You to Jeff Castille for this post: